1. Market Wrap: Ether Hits New High, Outperforms Bitcoin as Altcoins Rally
ETH is up about 11% over the past week, compared to a 3% rise in BTC over the same period.
Ether, the world’s second-largest cryptocurrency by market capitalization, reached a new all-time price high of around $4,400 on Friday, topping the previous record high of $4,379 in May.
ETH is up about 11% over the past week, compared to a 3% rise in BTC over the same period. Technical charts indicate further upside for ether relative to bitcoin, with an upside target toward 0.08 in the ETH/BTC price ratio as discussed in yesterday’s Market Wrap.
Overall, analysts expect further upside for cryptocurrencies for the remainder of the year despite occasional pullbacks, which can lead to choppy trading conditions.
“Bitcoin and major altcoins are experiencing strong volatility on the intraday chart, which is normal at all-time-high levels, like we have seen lately,” Lukas Enzersdorfer-Konrad, Bitpanda chief product officer told.
“The last negative days failed to damage the overall market structure, and fundamentals further indicate that the long term remains decisively bullish,” Enzersdorfer-Konrad wrote.
Bitcoin (BTC): $62,346, +1.70%
Ether (ETH): $4,394, +3.08%
S&P 500: $4,605, +0.19%
Gold: $1,782, -0.97%
10-year Treasury yield closed at 1.55%
The great rotation
Despite recent volatility, some traders are starting to position for further upside in alternative cryptocurrencies (altcoins) such as ether.
“Lately, there has been an increasing number of conversations among investors around shifting portfolio allocations from bitcoin to altcoins to capture the higher returns alts have provided during more speculative risk-on periods,” FundStrat, a global advisory firm, wrote in a Thursday newsletter.
“The good news (for BTC and ETH price) is that the tides appear to be shifting towards a more risk-on fall in traditional markets,” FundStrat wrote.
2. Identity Thieves Exploit El Salvador’s Chivo Bitcoin Wallet’s Setup Process
Hundreds of Salvadorans say hackers opened Chivo Wallets with their ID numbers to claim the $30 bitcoin incentive dangled by Nayib Bukele’s government.
At first, Cynthia Gutierrez refused to download Chivo, the digital wallet developed by El Salvador’s government for the use of bitcoin throughout the country and released on Sept. 7.
She decided to open the app on Oct. 16 after learning from fellow Salvadorans that hackers had activated wallets associated with the nine-digit numbers on their identity cards, known as DUI for its acronym in Spanish.
“This was growing more and more, reaching into my close circle,” Gutierrez, 28, told us.
When Gutierrez entered her personal information, a screen popped up saying her document number was already associated with a wallet. Immediately, she took a screenshot, fearing that her data would be used for illicit purposes.
“This document number is already registered.” The message, in Spanish, that Gutierrez received when she tried to activate her wallet (Cynthia Gutierrez)
Gutierrez’s case is one of the hundreds that Salvadorans have reported on social media and to local advocates since September, when bitcoin was established as legal tender and Chivo started being massively used in the country.
Between Oct. 9 and Oct. 14, Cristosal, a human rights organization in El Salvador, received 755 notifications of Salvadorans reporting identity theft with their Chivo Wallets, Rina Montti, the group’s director of human rights research, told.
In the majority of those cases, the affected Salvadorans tried to activate their wallets after they learned of the large number of people reporting that their identities had been stolen.
The hackers had an incentive: Each wallet came loaded with $30 worth of bitcoin, provided by the administration of Salvadoran President Nayib Bukele to encourage citizens to use the cryptocurrency.
El Salvador’s government did not respond to a request for comment about claims of identity theft involving the wallets by press time.
With the adoption of bitcoin, Bukele positioned his Central American country at the center of a global discussion about the future of money. The process was not without its critics, such as those made against Article 7 of the law, which stipulates that all merchants must accept bitcoin as a form of payment when customers offer it.
The president later denied that bitcoin acceptance would be mandatory. Salvadorans were baffled by the discrepancy between what the president said and what the law stated.
In August, polls showed that 65% to 70% of Salvadorans opposed the adoption of bitcoin, and several protest marches took place in the streets. According to the latest official data provided by Bukele at the end of September, more than 2 million people downloaded the Chivo Wallet, as part of an aggressive agenda that also included bitcoin mining with volcanic energy.
3. BIS Report Questions Whether Stablecoins, CBDCs Can Create Risks in Developing Countries
The Bank for International Settlements paper found that although stablecoins may be adopted in some of these markets, they may also present wider challenges and have not been tested on a large scale.
A number of emerging markets and developing economies (EMDEs) have been looking at stablecoins and central bank digital currencies (CBDC) to address weaknesses in their financial systems.
But according to a paper released Friday by the Bank for International Settlements (BIS), these digital currencies may create daunting issues in these markets and not address problems that other fintech innovations are tackling.
“Stablecoin arrangements aspire to improve financial inclusion and cross-border remittances — but they are neither necessary nor sufficient to meet these policy goals,” the authors of the report, entitled What Does Digital Money Mean for Emerging Market and Developing Countries, write.”
EMDEs in Latin America and other regions have turned increasingly to stablecoins as a store of value. Stablecoins have appeal in countries where the local currencies tend to be less stable and possibly subject to capital controls because of inflation.
The Basel, Switzerland-based BIS is a 91-year organization that supports central banks’ efforts to create banking and financial stability through research and by fostering cooperation among central banks on a range of issues.
The report’s authors question whether stablecoins could “offer lasting competitive advantages over rapidly developing, evolving digital payment services,” including digital ID, e-money and mobile banking. They add that stablecoins could generate new risks related to such issues as governance, efficiency in payment processes, consumer protection and data privacy.
The authors raise concerns about CBDCs, writing that “there is a risk that in periods of systematic stress, (that) households and other agents may shift from bank deposits or other instruments into the CBDC, spurring a ‘digital run’ of unprecedented speed and scale,” and questioning “whether they are necessary or desirable for all jurisdictions.”
But the authors also write that stablecoins in particular have “drawn great — and much needed — attention to the challenges of financial inclusion and cross-border payments and remittances.” This development has underscored efforts to foster a less restrictive regulatory environment, improve “monetary and financial stability frameworks and payment infrastructures, particularly across borders.”
4. DOJ to Hire Director for Its Crypto Enforcement Unit
The director will lead a team of prosecutors in investigating and prosecuting cryptocurrency cases as part of a national effort to prevent the use of crypto for illegal purposes.
The U.S. Department of Justice (DOJ) is looking for someone to head its newly announced National Cryptocurrency Enforcement team. The DOJ posted a job opening for the director’s role on USAJobs, the Federal government’s jobs website.
The director will lead “a team of experienced prosecutors investigating and prosecuting cryptocurrency cases as a central part of a nationwide enforcement effort to combat the use of cryptocurrency as an illicit tool,” the job posting said.
The job, which will command a salary of between $144,128 and $172,500 depending on an applicant’s experience, will also require consulting with United States Attorney’s Offices and investigative agencies involved in crypto investigations, and working with state and local law enforcement agencies.
The director will also be responsible for communicating with the Financial Crimes Enforcement Network (FinCEN), the U.S. Securities and Exchange Commission (SEC) and other agencies, intelligence agencies and the private sector regarding crypto technology and regulation.
In a speech at the Aspen Cyber Summit on Wednesday, U.S. Deputy Attorney General Lisa Monaco announced the formation of the new team, which she said would be composed of anti-money laundering professionals and cybersecurity experts.
5. Bitcoin Miner Rhodium Enterprises Plans to Raise Up to $100M in IPO
The miner expects to use its liquid-cooling technology to mine bitcoin more efficiently.
Bitcoin miner Rhodium Enterprises intends to become a publicly traded company, according to a filing with the U.S. Securities and Exchange Commission (SEC), in which it outlined plans to raise up to $100 million.
The Delaware-based company, which started mining in September 2020, will trade under the ticker RHDM. The miner generated revenue, net income and adjusted EBITDA of $48.2 million, $14.9 million and $40.9 million, respectively, during the six months ended June 30, according to the filing.
Rhodium plans to use its proprietary liquid-cooling technology to mine bitcoins cost effectively. The company said that the technology extends the mechanical life of its bitcoin miners by 30%-50%.
Rhodium said that its 80 megawatt (MW) of power capacity is enough to run more than 22,600 miners at its “initial Texas site.” These miners have a total hashrate of about 1.8 exahash per second (EH/s).
The company expects to add 45 MW of additional power and grow its hashrate to approximately 2.7 EH/s by year’s end.
Rhodium is launching a second Texas mining facility by April 2022, and it has already acquired miners with approximately 225 MW of power for delivery the same month.
B. Riley Securities is the sole book running manager of the IPO.
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October 30, 2021